Season 1 Episode 7 - Lawyering Up: The Impact of Class Action Lawsuits on the Retirement System

Jerry Schlichter and Jamie Fleckner have some things in common. They both got into law through political activism, and they’ve built their careers on ERISA litigation. But where they differ is largely about who their clients are. One represents plan sponsors and their providers, the other represents employees who feel they have been wronged, and their legal battles have shaped how the defined contribution retirement space thinks about innovation. In this episode, we sit down with each to try to understand the history of these cases, how they work, and how litigation has influenced plan sponsor decision making.

Key Takeaways:

[:25] Josh opens up today’s episode on lawsuits and the effects it has on innovation. How did we get here in the first place? Let’s ask some prominent lawyers about the history of how this all came to be. 

 

[2:25] Jerry has always been an advocate for civil rights and has seen first-hand how much good law and order can do. After being a student protester and passing the bar, Jerry took on race and gender discrimination cases against large companies.

 

[4:05] Jerry’s path eventually led him to investigating 401k plans for minorities. The more he saw, the deeper he dug. He found himself in unknown territory. There was no definition on how companies were making their investments or the types of fees they were charging. If he were to take on this case, he would be going to war with companies with big pockets. 

 

[7:55] As a young lawyer that represents plan sponsors at the time, Jamie found himself deep into ERISA topics. Jamie mostly worked around the issue of company stock options and retirement plans, but what Jerry brought to the table was completely different. Plan fees have to be monitored and capped based on what’s happening in the market. Third-party mutual funds saw ‘record keeping’ fees as a loophole. 

 

[11:45] Jerry was challenging some pretty ‘status quo’ practices. In trial, Jamie saw first hand how little people understood about ERISA. After a month’s long trial and several witnesses taking the stand, the judge still had a thousand questions on how this process all works.

 

[15:15] Jerry knew he had to be detailed and diligent in his work. They had to make sure their research was accurate. His team read every public information available to understand this better. 

 

[18:45] The human element really comes to light in cases like this. A plaintiff was displeased with her plan sponsor and her 401k investments, but inadvertently didn’t know that by suing them, she was also suing her former employer; who she loved. 

 

[22:20] Trials are a big production with a lot of emotions to balance in between. Jamie explains why most companies decide to settle, even if they’re in the right. 

 

[26:15] Appeal after appeal, Jerry sees his case go to the supreme court. The first 401k excessive fees case in history. 

 

[29:15] Despite Jerry and Jamie been on both sides of an ERISA lawsuit more than once, they know that, for the most part, plan sponsors are not crooks.

 

[33:40] As long as plan sponsors make decisions based on the best interest of their participants, everything will be fine. This means, a lot more sponsors are playing things safe when it comes to other people’s investments. 

 

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Links:

The Accidental Plan Sponsor

Mentioned in this episode:

More about Jerry Schlichter

More about. Jamie Fleckner